What Apple’s AI deal with Google means for the two tech giants and for OpenAI

Although there are still many unanswered questions about the partnership, including the financial aspect and the duration of the agreement, some key points are already clear. Here’s why this agreement is good news for Googlebad news for Apple and bad news for OpenAI.

The deal once again confirms that Google has its AI mojo back.

When OpenAI launched ChatGPT in November 2022, and for much of the next two years, many industry observers had doubts about Google’s prospects in a changing landscape. The search giant sometimes seemed to flounder as he rushed toward terrain models that could perform as well as OpenAI’s ChatGPT and Anthropic’s Claude. Google has had several embarrassing product debuts, when its Bard chatbot and then its successor Gemini models got it wrong, recommended glue as pizza toppingand generated historically anachronistic images of black Nazis.

But today, Google’s latest Gemini models (Gemini 3) are among the most efficient on the market and are gaining ground with consumers and businesses. The company has also attracted many customers to its Google Cloud, in part thanks to the power of its custom AI chips, called tensor processing units (or TPUs), which can offer cost and speed advantages over Nvidia’s graphics processing units (GPUs) for running AI models.

Apple’s statement Monday that “after careful review” had determined that Google’s AI technology “provides the highest-performing foundation for the Apple Foundation models” served as the ultimate validation of Gemini, especially since until now, OpenAI had been Apple’s preferred technology provider for “Apple Intelligence” offerings. Analysts at Bank of America said the deal strengthens “Gemini’s position as a leading LLM for mobile devices” and is also expected to help build investor confidence in the sustainability of Google’s long-term search distribution and monetization.

Hamza Mudassir, who runs an AI agent startup and teaches strategy and policy at the University of Cambridge’s Judge School of Business, said Apple’s decision is likely not just about Gemini’s technical capabilities. Apple doesn’t allow partners to train on Apple user data, and Mudassir speculated that Apple might have concluded that Google’s control over its ecosystem, such as owning its own cloud, could provide data privacy and intellectual property guarantees that OpenAI or Anthropic might not be able to match.

The deal will likely also directly translate into revenue for Google. Although financial details of the company have not been disclosed, a previous Bloomberg report suggested that Apple pays Google around $1 billion a year for the right to use its technology.

The biggest prize for Google could be the foot in the door that the deal offers to Apple’s massive distribution channel: the estimated 1.5 billion iPhone users worldwide. With Gemini powering the new version of Siri, Google can get a share of any revenue these users generate from product discovery and purchases made through a Gemini-powered Siri. Eventually, this could even lead to an arrangement where Gemini’s chatbot app would be pre-installed on iPhones.

For Apple, the implications of the deal are a little more ambivalent

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The iPhone maker will obviously benefit from offering users a much better Siri, as well as other AI features, at an attractive cost and while ensuring user privacy. Dan Ives, an equity analyst who covers Apple for Wedbush, said in a note that the deal provides Apple “a springboard to accelerate its AI strategy through 2026 and beyond.”

But Apple’s continued need to rely on partners – first OpenAI and now Google – to deliver these AI capabilities is a worrying sign, suggesting that Apple, a champion of vertical integration, is still struggling to create its own LLM.

It’s a problem that has haunted the company since the generative AI era began: For several months last year, several Apple Intelligence features were delayed, and the long-awaited launch of an updated Siri was repeatedly pushed back. These delays damaged Apple’s reputation as a technology leader and angered customers, some of whom filed a class-action lawsuit against the company after AI features promoted in ads for the iPhone 16 were not initially available on the device.

When Apple CEO Tim Cook promised that an updated version of Siri would be released in 2026, many thought it would be powered by Apple’s own AI models. But apparently these models aren’t ready for prime time yet and the new Siri will instead be powered by Google.

Futurum Group analyst Daniel Newman said 2026 would be a “breakthrough year” for Apple. “We have long said that the company has a user base and distribution that allows it to be more patient in pursuing new trends like AI, but this is a critical year for Apple,” Newman said.

Cook shook up the ranks by installing a new head of AI who previously worked at Google on Gemini. And, if the delays turn out to be related to Apple’s specific privacy requirements, the wait could be worth it. Ideally, Apple would like an AI model that matches the capabilities of those from OpenAI, Anthropic, and Google, but is compact enough to run entirely on an iPhone, so that user data doesn’t need to be transmitted to the cloud. It’s possible, Mudassir said, that Apple is grappling with technical limitations regarding how much power these models consume and how much heat they generate. The partnership with Google gives Apple time to make breakthroughs in compression and architecture while allowing Wall Street to “get off its back,” he said.

Apple’s defenders note that the company is rarely a trendsetter when it comes to new technology: It wasn’t the first to create an MP3 player, a smartphone, wireless headphones or a smart watch, but it came from behind to dominate many of those product categories through a combination of design innovation and savvy marketing. And Apple has a history of learning from partners for key technologies, such as chips, before ultimately bringing those efforts in-house.

Or, in the case of Internet search, Apple simply partnered with Google for the long term, using the Google engine to handle search queries in its Safari browser. The fact that Apple never developed its own search engine hasn’t hurt its growth. Could the same principle apply to AI?

But the Apple-Google tie-up is almost certainly bad news for OpenAI

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Although the partnership with Google is not exclusive, meaning Apple can continue to rely on OpenAI’s models for some of its Apple Intelligence features and OpenAI still has a chance to prove the value of its models in Cupertino, Apple’s decision to go with Google is definitely a blow. At the very least, this reinforces the narrative that Google has not only caught up to OpenAI, but has now leapfrogged it by having the best AI models on the market.

Without integrated distribution through Apple’s customer base, OpenAI may have a harder time growing its own user base. The company currently has more than 800 million weekly users, but recent reports suggest the usage rate may be slowing. Sam Altman, CEO of OpenAI, noted that many people currently consider ChatGPT synonymous with AI. But that perception could crumble if Apple users enjoy using Gemini through Siri and come to view Gemini as the better model.
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Altman told reporters last month that he saw Apple, his company’s main long-term rivalL. OpenAI is developing a new type of AI device, with the help of former Apple chief designer Jony Ive, that Altman hopes will rival the phone as the primary means of interface between consumers and AI assistants. This device could debut this year. As long as Apple relied on ChatGPT to power Siri, OpenAI had a good idea of ​​the capabilities its new device would compete with. OpenAI is unlikely to have as much insight into Apple’s AI capabilities in the future, which could make it harder for newcomers to position their new device as an iPhone killer.

OpenAI must hope that its new device will be a success that allows it to cement users into a closed ecosystem, similar to the one Apple has built around its iOS hardware device and software. This “walled garden” approach is a way to prevent users from switching to competing products when they offer broadly similar features. OpenAI will also have to hope that its AI researchers make breakthroughs that give it a more decisive and lasting advantage over Google. This could convince Apple to rely more on OpenAI again in the future. Or, it could obviate the need for OpenAI to be distributed on Apple devices.